Much of the forex market has entered a period of consolidation following the US Dollar Index (DXY) retest of 103.50 on Monday.
That’s a key support level for the DXY that dates back to mid-December.
However, 103.50 is more notably the index’s yearly open.
Weekly and monthly opening prices serve as support or resistance; the only thing that trumps those is a yearly open.
So it’s no surprise to see pairs like EURUSD consolidate as the forex market awaits resolution from the dollar index.
But dollar bulls must do more than defend 103.50 if the DXY is to secure a bullish resolution.
Monday’s session closed below former range support at 104.12.
That’s the level I pointed out in Saturday’s forecast video.
So as long as DXY is below on a daily closing basis, the structure looks unfavorable for dollar longs.
At the same time, getting too bearish on the dollar is a mistake while the DXY holds above the 103.50 yearly open on a daily closing basis.
A resolution will materialize on a daily reclaim above 104.12 or a daily close below 103.50.
A daily close above 104.12 would confirm Monday as a bullish fakeout and open up the 105.60 level.
On the other hand, a daily close below 103.50 would flip that to resistance and expose levels like 102.60 and potentially 101.25.
Which way the DXY breaks from this 103.50 to 104.12 range will influence major currency pairs like EURUSD, USDJPY, and others, so it’s one to watch.
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Hi Justin, thanks very much for your loyalty, u never disappoint,your analysis are always amazing,
You’re welcome. Thanks for the kind words.
Thank you for your timely, excellent analysis. Hope support holds-I’m holding Cable shorts.